Massachusetts Auto Dealer Magazine - June 2013

June 2013 • Vol. 26 No. 6

FIRST CLASS MAILUS POSTAGE PAID

BOSTON, MAPERMIT NO. 216

MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109

autoD E A L E R

M A s s A c h u s E t t s

The official publication of the Massachusetts State Automobile Dealers Association, Inc

Annual Meeting

2013

MASSACHUSETTS STATE AUTOMOBILE DEALERS ASSOCIATION

Thank You t o o u r S p o n S o r S

2013 AnnuAl Meeting

Ta b l e o f C o n T e n T s

4 From the President: standing Up for the law

6 the roUndUP: legislature Passes spending, Tax Plans

8 LegisLative scorecard

9 insUrance: frequently Cited osHa standards

10 aUto oUtLooK

12 accoUnting: Dealer-owned Reinsurance Companies

14 FinanciaL services: be Mindful of the future

16 Cover Story:

2013 MsaDa annual Meeting

22 neWs From around the

horn

27 nada UPdate: a franchise

system Under attack

28 nada marKet Beat

www.msada.org Massachusetts auto Dealer JUNE 2013

The official publication of the Massachusetts State Automobile Dealers Association, Incs Ta f f D i R e C T o R y

Robert O’Koniewski, Esq.executive Vice [email protected]

Jean Fabrizio Director of administration

[email protected] Brennan, Esq.

staff [email protected]

Paul Fellowsadministrative assistant/ Membership Coordinator

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a U T o D e a l e R M a g a z i n e

Robert O’Koniewski, Esq.executive editor

Tom Nasheditorial Coordinator

[email protected]

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aD DiReCToRyblumshapiro, 24

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from the President4

JUNE 2013 Massachusetts auto Dealer www.msada.org

by Scott Dube, MSADA President

A

Standing up for the lawThe wheels of justice grind slowly, but we’re in this together

s you’re enjoying your Independence Day celebrations, in addition to remembering the sacrifices our forefathers made to give us the freedoms we enjoy, I hope you’ll keep in mind that the American experiment remains very much an experiment.

I thought about this coming away from our Annual Meeting, held during a beautiful first day of Summer at the Marriott Long Wharf. I want to thank the MSADA staff for making the meet-ing a huge success. While our system of government is the best in the world, freedom and free en-terprise seem to be under constant attack in many ways.

Just take a look at Tesla at-tempting to subvert our franchise law as an example. We have a law in this Commonwealth that is clear about not allowing auto manufacturers to directly sell their products to consumers. It’s a system that protects custom-ers, and is rightfully established in law. Unless, of course, people decide to not follow the law and just wing it hoping government officials are so enamored with the idea that they to can see ig-noring the law.

Then, we’ve seen the legislative branch of Natick, the Board of Selectmen, approve the Tesla store they wanted to open with-out a dealer. Our protest to the courts unfortunately found a judge who fell for the Tesla’s use of old law.

We’re confident that we have a solid case in our appeal of that ruling. And despite the often idiotic rhetoric being spouted by that company’s president, this fight isn’t about him. It’s about the rule of law, and not allowing one exception that could turn into the breakdown of the dealer franchise system across the

country.If our system of government were perfect, MSADA would

not be as busy. Instead, we’re constantly battling not just bad policy, which will always be a part of any democracy, but an anti-freedom bent that here can frequently be shrouded as “pro-consumer.” Our work to show that dealers have those interests more at heart than manufacturers, or, say, the Chinese auto parts industry, remains a long road ahead.

I’d like to use this space to thank former MSADA President Jim Boyle, who as I said at the meet-ing came into the position when a seismic shift was occurring in the auto industry that we’re still re-covering from. He did a great job of streamlining the operation both from a personnel and operational standpoint and really clearing the decks to allow us to be successful as business starts to return.

I’d also again like to thank our MSADA staff, our sponsors of the day’s events and most importantly

you, our member dealers. As we heard time and again through-out the day, your participation on a grassroots level is what makes all the difference when we’re facing off against those who would curtail our ability to effectively do business here.

During the next year, as our Legislature revs up again, you’ll have plenty of opportunities to help look out for your business-es. I hope you’ll join me in doing our part to help this small part of the American experiment, free enterprise, fulfill the vision of our founders.

t

MSADA

“Our work to show that dealers have those

interests more at heart than manufacturers, or, say, the Chinese auto

parts industry, remains a long road ahead.”

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Name Contact Telephone

ADESA Boston Chris Carli (508) 270-5403ADP Dealer Services Maria Trezza (973) 404-4466Albin, Randall & Bennett Barton D. Haag (207) 772-1981American Fidelity Assurance Co. Tom Trudell (413) 885-5477AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533Bank of America Maryanne Recupero (800) 991-1770 Bank of America Merrill Lynch Lawrence Corrente (617) 434-2844 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000Boston Globe Mary Kelly (617) 929-8373The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519Burns & Levinson LLP Paul Marshall Harris (617) 345-3854Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400CVR Scott Herbers (800) 668-2332DealerTrack Ernest Lattimer (516) 547-2242Downey & Company James Downey (781) 849-3100EasyCare New England Inc. Mike Douglas (770) 246-9724Ethos Group, Inc. Drew Spring (617) 694-9761F & I Resources Jason Bayko (508) 624-4344Federated Insurance Chris Welch (724) 766-6666First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320Grant Thornton LLP Alan Oslomowski (508) 926-2200Huntington National Bank John J. Marchand (781) 326-0823Key Bank James Q. Moretti (781) 558-5132Leader Auto Resources, Inc. John Ackermann (518) 857-8853Lynnway Auto Auction Jim Lamb (781) 596-8500M & T Bank John Federici (508) 699-3576MetroMedia Energy Timothy Teevens (800) 828-9427Micorp LLC Ryan Kim (508) 832-9816Mid-State Insurance Agency James Pietro (508) 791-5566Mintz Levin Kurt Steinkrauss (617) 542-6000Murtha Cullina Thomas Vangel (617) 457-4000Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120Performance Management Group, Inc. Mark Puccio (508) 393-1400Ray-Jurgen Richard Thibadeau (860) 585-0111R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300Resource Management Group J. Gregory Hoffman (800) 761-4546Reynolds & Reynolds Marc Appel (413) 537-1336Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301Samet & Company John J. Czyzewski (617) 731-1222Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028Sentry Insurance Company Eric Stiles (715) 346-7096Shepherd & Goldstein Ron Masiello (508) 757-3311Silverman Advisors, PC Scott Silverman (781) 591-2886Southern Auto Auction Tom Munson (860) 292-7500Sovereign Bank Richard Anderson (401) 432-0749Target Dealer Services Andrew Boli (508) 564-5050TD Auto Finance BethAnn Durepo (603) 490-9615TD Bank Michael M. Lefebvre (413) 748-8272Wells Fargo Dealer Services Christopher Peck (508-314-1283) Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (800) 443-4513

AssociAte MeMber Directory

Msada Board Barnstable County

gary beard, Dick beard Chevrolet

Berkshire Countybrian bedard, bedard brothers auto sales

Bristol CountyRichard Mastria, Mastria auto group

Essex CountyWilliam Deluca, Woodworth Motors

John Hartman, ira Motor group

Franklin CountyJay Dillon, Dillon Chevrolet

Hampden CountyJack sarat, Jr., sarat ford

Hampshire Countybryan burke, burke gMC

Middlesex CountyChris Connolly Jr., Herb Connolly Motors

scott Dube, bill Dube Hyundai

Norfolk CountyJack Madden, Jr., Jack Madden ford

Charles Tufankjian, Toyota scion of braintree

Plymouth CountyChristine alicandro, Marty’s buick gMC isuzu

Suffolk CountyRobert boch, expressway Toyota

Worcester County steven sewell, Westboro Mitsubishi

steve salvadore, salvadore auto

Medium/Heavy-Duty Truck Dealer Director-at-Large

[open]

Immediate Past PresidentJames g. boyle, Tuck’s Trucks

NADA DirectorDon sudbay Jr., sudbay Motors

OFFICERSPresident, scott DubeVice President, Chris Connolly, Jr.Treasurer, Jack Madden, Jr.Clerk, Charles Tufankjian

MSADA

Fiscal year 2014 begins on July 1. Similar to the student who rushes to complete a book report or term paper on the eve of the project’s due date, our General Court is no different. In the week leading up to the deadline for having an FY2014 fiscal plan in place, the Legislature completed work on one-half of the equation – revenues, ded-icated to a transportation spending plan – leaving general spending to the very end. However, this will not be without the usual bumps in the road.

As reported previously, the House and Senate during each’s tax debate were in general agree-ment on what taxes would be raised, dedicated to transportation projects, and the amount sought - $500 million in new taxes. In the end, on this they were consistent: The gas tax will increase by 3 cents and tie future increases to inflation; the per-pack tax on cigarettes will go up $1; for the first time, the state’s 6.25% sales tax will now apply to computer system design services; and there are several minor business tax changes affecting utili-ties and others.

However, even before the two chambers voted on the final plan, the governor was threatening a veto, because, in his mind, taxes were not raised high enough to cover the portion of the $800 mil-lion needed to fund the transportation bill. Re-gardless of the veto threat, on June 26 the House and Senate approved the final tax plan with veto proof majorities: 105-47 in the House and 34-6 in the Senate. As we go to press, the governor has not indicated whether he ultimately will sign the bill, send it back for further amending, or veto it outright.

Dealers should take note - as part of this plan, the Legislature has earmarked all sales tax rev-

enue from motor vehicle sales to a dedicated fund for transportation spending. This should raise an eyebrow at least to the extent that legislators try to revisit this funding source down the road when they need more money. Previous to this change, all those monies went directly to the state’s Gen-eral Fund.

On the spending side, the Legislature will miss the July 1 deadline, probably by a day or two, as the conference committee set up to resolve the differences in the $34 billion House and Senate budgets was just making its report by the week-end leading up to the start of the next month. One note of interest – the agreed upon bill the legis-lators will be voting on in the first week of July will be out of balance without over $300 million in new tax revenues in the transportation bill the governor is threatening to veto.

So, as we begin FY2014, we have a transporta-tion bill that raises various taxes at levels not high enough for the governor, who threatens a veto, upon which the government will depend for the upcoming fiscal year, which must be balanced at its time of passing as required by the state Con-stitution. Time will tell whether the Legislature moves ahead and votes on a spending plan whose constitutional compliance depends on what the governor does with the tax bill. Stay tuned for the rest of the story.

73rd Annual MeetingOn Friday, June 21, your Association convened

its 73rd Annual Meeting at the Marriott Long Wharf in Boston. We had a successful turnout of members, and attendees heard from a diverse group of speakers, including Sean Bradley of

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the roundup

by Robert O’Koniewski, Esq. MSADA Executive Vice President

legislature Prepares for Summer by Passing Spending, Tax Plans

7


MSADA

Dealer Synergy, U.S. Senatorial candidate Gabriel Gomez (R-Cohasset), State Sen. Marc Pacheco (D-Taunton), IHS Global Insight economist George Magliano, RMV Registrar Rachel Kaprielian, Mike Colias of Automotive News, and Frank O’Brien of O’Connor & Drew. You can read the details of our meeting as part of this month’s cover story.

We owe a “thank you” to our sponsors for the day, without whose assistance we could not put on such fine events: • Boston Globe/Cars.com – Gold Sponsor• Blum Shapiro – Bronze Sponsor• DealerTrack – Bronze Sponsor• Federated Insurance – Bronze Sponsor• Ethos Group – Welcome Gift• Murtha Cullina – Lunch Sponsor• Zurich – Break Station Sponsor• Bellavia Blatt Andron & Crosset LLP – Cocktail Reception

Auto Body Labor RateOn June 20, the Joint Committee on Fi-

nancial Services conducted a public hear-ing on legislation designed to increase the reimbursable labor rate auto body repair-ers receive from insurance companies – House 969 (Reinstein) and Senate 497 (Welch). Testifying for MSADA along with me in support of the legislation were Essex County director, John Hartman of the Ira Motor Group, and Greg Ross, di-rector of the Ira Collision Center.

The Massachusetts average labor rate is presently just under $36 per hour, ranking us 51st out of 51 state jurisdictions and DC. The national average is almost $46 per hour, with no state having an aver-age hourly rate below $40. The rate has remained essentially unchanged since the mid-1980s.

The bill made it through the House last year at the tail end of the session, dying in the Senate as time ran out. In previous years the Senate has acted favorably on bills, while the House has been more re-

luctant to consider a legislative solution to this problem. Observers saw last year’s House action as a positive sign for some-thing getting into law during this session. Nevertheless, the monolithic insurance industry will attempt to throw its consid-erable weight around in order to keep the rate at a level well below that found even in our New England states.

Regional Dealer MeetingsThroughout the year we continue to

conduct regional meetings across the state at which we provide an update on vari-ous legislative and legal issues your As-sociation is addressing, as well as receive input from our member dealers on issues of interest. We also invite area legislators to attend the events to encourage active dialogue between the elected officials and local dealers.

On Friday, June 7, we held a dealer leg-islative meeting at the UMass-Lowell Inn and Conference Center for our members and legislators in the Lowell area. Attend-ees included State Rep. Tom Golden (D-Lowell), State Rep. Kevin Murphy (D-Lowell), and Kara Keefe, chief of state to State Sen. Eileen Donoghue (D-Lowell). On Friday, June 14, we convened a meet-ing for dealers and legislators in the great-er Springfield area at the Springfield Mar-riott. Attendees included State Rep. Mike Finn (D-West Springfield), State Rep. Aaron Vega (D-Holyoke), and staff from State Sen. Michael Knapik (R-Westfield), State Sen. Jim Welch (D-West Spring-field), and State Rep. Angelo Puppolo (D-Springfield).

Congratulations to Andy CrewsRecently Andy Crews, dealer princi-

pal for the AutoFair Dealership Group in Massachusetts and New Hampshire, was elected Chairman of the Board of Direc-tors for the New Hampshire Auto Dealers Association. The Group’s Massachusetts

stores are AutoFair Honda of Plymouth and AutoFair Nissan Tewksbury. Con-gratulations and good luck to Andy dur-ing his tenure.

Welcome, Peter BrennanThe newest member of our staff is attor-

ney Peter Brennan, who will serve in the capacity of staff attorney, assisting in our legal and legislative matters. Peter comes to us from his most recent endeavor as chief of staff to State Senator Bob Hed-lund (R-Hedlund), the assistant minority leader. Prior to that, he was on the staff of former Sen. Michael Morrissey (D-Quin-cy), who is the current Norfolk County District Attorney. Peter is a graduate of University of Massachusetts-Amherst and Suffolk University School of Law. When you have a moment, please be sure to welcome Peter aboard.

Our PACs - DEAC & NCDPACEach year MSADA expresses itself po-

litically through NADA’s federal PAC, Dealers Election Action Committee (DEAC), and through our state PAC, the New Car Dealers Political Action Com-mittee (NCDPAC). We depend on con-tributions from our dealers to keep these PACs strong, as we need to have an active voice in Washington and on Beacon Hill.

Every dealer should be contributing to both PACs every year. It is an inex-pensive insurance policy. Defeating the original right to repair bill, which would have severely hurt your parts sales, and fighting for the dealer exemption to the federal Wall Street reform law are two great examples why we need to be strong politically.

If you have not yet given to the PACs this year, please contact me at [email protected] and we can make sure your contributions happen. Thank you.

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8

Ideally your business should be in com-pliance with all state and federal regula-tions. However, this is often difficult due to limited resources. So let’s talk about us-ing your time to get the “biggest bang for the buck”. A business should put their ef-fort towards complying with those specific OSHA regulations most frequently identi-fied as problem issues.

Let’s review the top ten list and recom-mended solutions.

Hazard communication

This has been the number one cited stan-dard since being issued in the 1980’s. Com-pliance is not easy due to the complexity of the program. Requirements include a writ-ten program, chemical list, material safety data sheets (MSDS) to match each chemi-cal listed and employee training. The clos-ing paragraph will guide you to additional sources of help.

respiratory protection

Once again this is too complicated of a standard to address in this small space. Requirements include a written program, hazard evaluation, medical evaluations of affected employees, employee training and equipment storage and maintenance.

electrical – General requirements

This standard addresses electrical haz-ards in the workplace. Electrical equipment must be free from recognized hazards that are likely to cause death or serious physi-cal harm to employees. It states that circuit breakers or other “disconnecting device” must be labeled/marked to “identify its purpose.” Also it requires a three-foot clear

zone (no storage) in front of electrical pan-els, fuse boxes and other electrical equip-ment.

abrasive wHeel macHinery

Bench and pedestal grinders must be equipped with a tool rest, spindle guard and tongue guard. The tool rest and tongue guards must be adjusted close to the grind-ing wheel, within 1/8th of an inch. Grind-ers must be attached to the bench or floor to keep them from moving while in operation.

personal protective equipment

Provide adequate PPE for employees including eye wear; splash shield, gloves and apron (for handling battery acid); and respiratory protection where required. Recent revisions require the employer to complete a written hazard evaluation of the workplace to determine employee hazards and the PPE necessary to protect them.

electrical – wirinG, components and equipment

Describes general requirements for per-manent and temporary wiring. Citations on this standard often involve improper or overuse of extension cords (temporary wir-ing) where permanent wiring (in conduit) is required.

General requirements – HousekeepinG and floor loadinG

Addresses among other things the em-ployer’s responsibility to maintain a clean workplace, clear aisle ways and to post safe floor load limits where required. One of the most common citations results from the failure to post a safe floor load limit sign in mezzanine or second floor storage areas. The standard states: “In every building…the loads approved by the building official shall be marked on plates of approved de-sign…”

medical services and first aid

This standard requires “ready availabili-ty” of medical services for injured employ-

ees. The second part of this standard is the more frequently cited portion as it requires “suitable facilities for quick drenching or flushing of the eyes and body (read eye wash stations)” where eyes or body are ex-posed to corrosive chemicals or materials.

portable fire extinGuisHers Where portable fire extinguishers are

provided and employees are expected to use them to fight incipient–stage fires, the following apply: extinguishers must be mounted and identified (on a wall with proper signage); adequate in number and type for the existing fire hazards; inspect-ed (visually each month) and maintained (annually); and employee training (at hire and at least annually thereafter). There are many more requirements that you should become familiar with.

spray finisHinG witH flammables/combustibles

Establishes minimum standards for spray paint booth and spray operations. This standard is quite extensive and ad-dresses everything from clogged filters to the need to post “No Smoking” signs. Most importantly, it requires that the booth and upstream and downstream sides of the filters must be protected by an automatic sprinkler system (or other fire protection system).

wHere to find Help

There is help available for businesses, some of it from OSHA. For additional help you can contact your local OSHA of-fice or visit their website at www.osha.gov. The best help is available in the “Outreach - Small Business” section where you can find sample programs. There are also areas for “frequently asked questions” and “in-terpretations.” Complete standards can be printed off of the website if desired. Our Loss Prevention Guidebook includes in-formation on these standards and sample programs.

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insurance


9MSADA

Frequently Cited OSHA StandardsBy Steven Megeest e v e n me G e e i s r e G i o n a l s a l e s m a n a G e r a t t H e fr a m i n G H a m re G i o n a l off i c e f o r zu r i c H no r t H am e r i c a co m m e r c i a l’s pr o G r a m s & di r e c t ma r k e t s’ b u s i n e s s u n i t.He cAn be reAcHeD At [email protected].

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AUtO OUtLOOK


11MSADA

Back in March 2012, I wrote about the new IRS requirements for reporting foreign assets. In short, “specified indi-viduals” holding interests in “specified foreign assets” exceeding certain thresh-old amounts were now required to report these assets on Form 8938, Statement of Specified Foreign Financial Assets. Form 8938 is attached to the taxpayer’s income tax return starting with the 2011 tax year. This reporting requirement is separate and distinct from Form TD F 90-22.1 (the “FBAR” form) and the filing of one form does not affect the filing of the other form.

In that article there were two situations with respect to producer owned reinsur-ance companies that I stated would not currently require the filing of Form 8938. One such situation was if the dealer owned reinsurance company is owned by a do-mestic entity, i.e. a partnership, non-single member LLC, corporation or non-grantor trust. In those situations, Form 8938 was not required to be filed since the reporting requirements did not include “specified foreign assets” owned by domestic enti-ties. This currently remains the case for tax years through 2012, but could change as early as tax years beginning in 2013. Please note that dealer owned reinsurance companies owned by the dealer directly, or by a single member LLC or grantor trust, are subject to the Form 8938 filing

requirements assuming all other require-ments are met (please refer to my March 2012 column).

The other situation that did not require the filing of a Form 8938 as stated in my earlier column was when the dealer owned reinsurance company was a controlled for-eign corporation (“CFC”) with a 953(d) election in place. The reasoning behind this was that a 953(d) election is an elec-tion to treat a foreign insurance company as a domestic corporation for income tax purposes. It logically seemed to follow that a dealer owned reinsurance company that elected to be treated as a domestic corpo-ration for income tax purposes would not be included in the definition of “specified foreign assets” because it would be con-sidered a “U.S. Person” and thus would not be considered a “foreign entity”. This was the prevailing industry treatment of CFCs for purposes of the Form 8938 filing requirements.

The IRS recently issued final regulations under the Foreign Account Tax Compli-ance Act (“FATCA”), which instituted the Form 8938 and its reporting requirements. These regulations contain the following within its definition of “U.S. Person”:

. . . the determination of whether an insur-ance company is a U.S. person is made without regard to an election by a company not licensed to do business in any State to be subject to U.S. income tax as if it were a domestic insurance company. Thus, a foreign insurance company not licensed to do business in any State that elects pursu-ant to section 953(d) to be subject to U.S. income tax as if it were a U.S. insurance company is not a U.S. person.

This definition effectively requires Form 8938 reporting of all dealer owned reinsurance companies, other than those

owned by a domestic entity (and assum-ing the total specified foreign asset owned by the taxpayer exceeds the thresholds for reporting), regardless of the fact that a 953(d) election may have been made for the company.

There currently does exist, however, some uncertainty as to whether owners of dealer owned reinsurance companies with a 953(d) election in place are required to file Form 8938 with their 2012 income tax returns or whether this requirement first becomes effective with the filing of their 2013 income tax returns. There are some advisors taking the conservative approach that Form 8938 should be filed with 2012 income tax returns and, if your 2012 in-come tax returns have already been filed, the return should be amended to include the Form 8938.

There are others that take the approach that since the recently released FATCA regulations that define a “U.S. Person” as excluding foreign insurance companies with valid 953(d) elections are not effec-tive until January 28, 2013, that Form 8938 is not required for owners of these types of entities until 2013. The price of non-compliance is steep – a penalty of $10,000 could be assessed. Even those advisors taking the more conservative approach that filing should commence in 2012, have expressed the thought that the IRS most likely would be lenient with re-spect to failure to file in 2012 for 953(d) companies. It is my understanding that in-dustry counsel is in communication with the IRS attempting to obtain clarification of the effective date.

Hopefully further guidance on this will be issued shortly. In any event, the appli-cation of these filing requirements for the 2013 tax year appears clear.

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Accounting12 MSADA

Dealer-Owned Reinsurance Companies and IRS Reporting of

Foreign Assets: An UpdatebyMitchell S. HalpernmitcHell s. Halpern is a principal at o’connor & drew, p.c., msada tax counsel

MSADA

Searching...I just turned 63 and during my life I have ex-

perienced many fixtures - - things I never thought would change. I started my career near Wall Street in lower Manhattan and the Port Authority was completing construction on the World Trade Center - - I thought

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Business owners have long been ad-mired for their entrepreneurial spirit, abil-ity to recognize opportunities, and risk. They’ve worked long, hard hours to build and achieve great success with the vision of passing their business on to the next generation. But will the business actually make it to the next generation?

Every business has a story. Whether the business started as a vision, by accident or by matter of circumstance, business owners have sacrificed a great deal to see their business to fruition. So why is it that only one in three family-owned business-es make it to the second generation?

The grand plan for many small busi-ness owners is to pass the business down to future generations. More often than not, however, it is unsuccessful. A fam-ily owned business has roughly a 1 in 3 chance of ownership succession. What’s more, only 3 percent of family businesses make it to the fourth generation. Makes you wonder what’s happening, doesn’t it?

Well, actually, it’s pretty simple. Im-proper planning for business succession, lack of communication and lack of funds to pay estate taxes are the three leading causes of why many family owned busi-nesses do not make it to the next gen-eration, and in almost 50 percent of the cases, the death of the founder occurred prior to the business being passed on, ac-cording to a University of Connecticut Family Business Program survey of 800 family-owned businesses.

Consider this Business Owners’ Story

Jen and John are proud people and have instilled good values in their chil-dren. They started their Auto Dealership, an S-Corporation, on a shoe string bud-get more than 30 years ago. It hasn’t been easy and meeting payroll every Friday was sometimes tough. Their business has a tendency to mirror the up-and-downs of the economy, so at times, life is difficult and the income isn’t always there. They love working for themselves and hope to pass the business on to their children. During the past 30 years, they persevered and put all of the profits back into the business. Now, the business is valued at $20 million and it represents the primary source of their wealth. However, they can’t access it.

Current Situation• Jen: age 50, John: age 56 with heart con-dition

• They want to retire in 4 years and have multiple goals• They have two children, Mary and Su-san • Mary, age 30, is a school teacher and has no interest in running the business, al-though she wouldn’t mind owning a piece of the business. • Susan worked in another industry before joining her parents a few years ago. She is now 28 years old, is a sales manager for their Auto Dealership and her business style is a little different than her parents’. She loves what she’s doing and wants to move into management and eventually take over the company.• Mark works for the Dealership as their CFO. He is the longest term employee and his style is similar to the owners.

Goals and Issues • Jen and John want to access 100 per-cent of the value of their business within 4 years and be able to retire with comfort and flexibility. They also want to mini-mize taxes. • They are not sure what they should be doing and what their options are. • They want to do what’s best for the business, their children, and their key em-ployee.

Having a large company and generat-ing more revenue is no guarantee for sur-vival. Survival is dependent upon proper planning and the business owners’ frame of mind. Below are a few tips to help with a smooth transition: • Business owners may want to first re-flect on why they started the business. Was it to keep the business in the family for generations or was it to provide for the family for generations? • If the purpose of the business is to keep the business in the family for genera-tions, then the business owner may want to reframe the dialogue on succession

Be Mindful of the FutureFamily Owned Businesses: Will They Last?

14 Financial services

By Vincent Saccone, LUtcF and PaUL cUomo oF the BoSton BUSineSS adViSory GroUP

Percentage of Family Firms Surviving

Future Generations

1st Generation – 100 %

2nd Generation – 30 %

3rd Generation – 12 %

4th Generation – 3 %

and longevity. Many business owners are reluctant to train the next generation of leadership, give up control, and transfer the business. This mindset may harm the success rate of the successor owners be-cause the next generation may not have been able to develop their decision mak-ing process, leadership and management skills.• If the purpose of the business is to pro-vide for the family for generations, then maximizing its value in a sale to third parties may be the better way to go be-cause successor leadership within the family may not be available to keep the business successful. The business owner should, however, also be taking out value over time, perhaps through a qualified re-

tirement plan.• Also, business models or leadership styles should never be permanent. It needs flexibility in order to adapt to change, new environments, and to survive.• Business owners may want to collabo-rate more with the next generation and make sure everyone in the family is on the same page. For example, the business owner can groom the next generation on business knowledge, long-term perspec-tive and cash flow. The business owner should also pass on the values of the entrepreneurial spirit and discourage the sense of entitlement which may result in passivity and improper management and operation of the business. • The next generation can provide the cur-

rent business owner with fresh perspec-tive on technology, new ideas, market research and where they see the business/industry going.

At any given time, 40 percent of U.S. businesses are facing the succession is-sue, according to a May 2009 Study by the SBA titled “Transferring Manage-ment in the Family-Owned Business.”

Transitioning to the next generation is a process that may extend over many years depending on the business owner’s age and on the successor’s age. It occurs in phases and over time, while the next generation is being educated on the fam-ily business. There are many benefits to early planning, including (1) reassuring employees, suppliers and customers re-garding the next leader, (2) giving sib-ling’s time to adjust to the decision and to make alternative career decisions, if necessary, and (3) enabling the business owner to prepare and plan for retirement.

The next generation can help to move the family legacy forward. Business owners can choose how their business will live on. Passing on a healthy, well-planned business will help ensure a smoother transition and help ensure the “labor of love” lives for many genera-tions to come.

t

Saccone & Cuomo, Registered Representatives and Sac-cone, Financial Advisor of Park Avenue Securities LLC (PAS), 160 Gould Street, Needham, MA 02494, 781-449-4402. Securities products/services and advisory services are offered through PAS, a registered broker-dealer and invest-ment advisor. Financial Representatives, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Neither Guardian nor its subsidiaries, agents or employees provide tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. The Bos-ton Business Advisory Group is not a registered investment advisor. The Bulfinch Group is not an affiliate or subsidiary of PAS or Guardian. Life insurance offered through The Bulfinch Group Insurance Agency Inc., an affiliate of The Bulfinch Group, Inc. The Bulfinch Group is not licensed to sell insurance. Neither Guardian nor any of its subsidiaries, employees or agents provides tax or legal advice. PAS is a member of FINRA, SIPC. 2013-6203


15MSADA

The BosTon Business Advisory Group will Address your FinAnciAl issues on A monThly BAsis. emAil speciFic quesTions or suGGesTions For FuTure ArTicles To [email protected].

MSADAMSADAMSADACOver STOry MsAdA16

MSADA Annual Meeting


his first meeting as MSADA president, Scott Dube outlined the path laid before him and the challenges ahead.

He began by thanking Immediate Past President Jim Boyle.“When Jim took over we were right there in a very tough time in our industry,” Dube

said. “He did a great job of streamlining the operation both from a personnel and operational standpoint and really clearing the decks to allow us to be successful as business starts to return.”

Outlining the past year on the State House, Dube said the “Right to Repair” battle will have one final chapter as two different bills must be reconciled.

“Franchise law enhancements as part of legisla-tive affairs are one of the pillars of our existence,” Dube added. “Our franchise law has helped in fo-cusing our argument against Tesla.”

Noting the recent MSADA appeal of the court decision allowing a manufacturer-owned dealer-ship in the Commonwealth, Dube said he was con-fident the truth would win out.

“The judge fell for their use of old law, and we’re really confident we have a solid case on the appeal. But the wheels of justice grind slowly,” he said. “It’s important not because we’re worried about Tesla per se, but the concept of allowing a manufacturer to own a store could be abused in a lot of ways. We see this as a threat to the franchise system, as does NADA.”

NADA Director Don Sudbay echoed Dube’s concerns about Tesla, and said NADA has continued to make protecting the franchise system a priority.

“We all realize the franchise system is under attack,” he said. “There’s no question about it. NADA will be committing their resources. MSADA has the resources. We do have the wherewithal, and we do have the resolve. And I think all of us have to understand why the franchise concept is the best system for our customers.”

On Capitol Hill, Sudbay noted that without former NADA Director Ray Ciccolo, F&I changes being pushed through by federal regulators would have been worse.

“My predecessor Ray did the best he could to stop what could have been a really bad situa-tion,” Sudbay said of the Consumer Finance Protection Bill. “Ray managed to exclude dealers from the law, with the help of his contacts in Congress. “If dealers had been included, there

In

17MSADACOver STOry MsAdA

MSADA Annual Meeting


2013would be bedlam right now.”

“As far as where we’re going, NADA is putting all its resources into this issue,” Sudbay said. “We all have a 2 percent cap right now on our fi-nance reserve and what the CFPB has said is that we have taken that 2 per-cent and have not been fair about who we’ve discounted. They haven’t been able to show us any data at all to jus-tify what they’re saying.”

ATD Chairman Dick Witcher, intro-duced by Sudbay as “a tremendous ad-vocate for the franchise system,” gave a stark outline of how over-regulation

continues to stifle growth in the commercial truck market.“Sales volume in general has been down since 2007, all related

to emissions issues,” Witcher said. “Business owners are uncer-tain. They are facing the lowest interest rates, and the shortest lead times from orders to receipt that we’ve had in years.”

As MSADA Executive Vice President Robert O’Koniewski outlined, the key to pushing back on over-regulation is staying on top of what’s coming down the pike at the Legislature.

“The stuff on the Legislature’s plate is scarier than it’s been in the past,” O’Koniewski said. “There is a more pro-consumer bent, as opposed to a pro-business bent.”

While the “Right to Repair” situation will be patched up as best it can, O’Koniewski said the Association as made it a prior-ity to put a stop to Tesla’s encroachment on dealer franchise law.

“It’s not about the car or Elon Musk, whether he’s a vision-ary or PT Barnum,” O’Koniewski said. “We’ve filed a lawsuit because they were trying to open a store in Natick illegally.”

“They’re doing everything a dealer does in Massachusetts except having a dealer,” he added. “And while he’s talking about the merits of buying a car on the Internet, he’s having dealerships that do everything you guys and gals do.”

MSADA lobbyist Marty Corry stressed that in any legisla-tive fight, local support is key to winning over legislators.

“The best work we can do is at the local level,” Corry said. “It’s easy to brush us off when we’re in the building, but it’s hard to ignore five business people in the district down on Cape Cod., for example. I thank you for your participation an

hope you’ll get involved at that level.”

Annual Meeting18

MSADA Annual Meeting JUNE 2013 Massachusetts auto Dealer www.msada.org

Pacheco to dealers: Get involved in government

State Sen. Marc Pacheco (D-Taunton) praised dealers for strengthening Massachusetts’ econ-omy during times of widespread financial downturn. Pacheco began by citing friend and MSADA Board Member Rick Mastria, whose busi-ness he described as vital to his dis-trict’s economy.

To help dealers succeed further, he said government needs to learn more about their relationship with manu-facturers.

“We need to better understand your pain,” Pacheco said. “We need to better under-stand the fact that manufacturers continue to squeeze every penny out of every victory you’ve achieved in these challenging times.”

Pacheco described Senate Bill No. 129, which he filed in hopes to “re-establish the level playing field once had between manufacturers and franchise dealers” by fixing loopholes in national legislation that affect dealers in the Commonwealth. He encour-aged attendees to get involved.

“If you take anything away from this meeting, I hope you understand the power each and every one of you have to make Massachusetts a friendlier environment to your particular piece of business,” he said.

“I’ve aimed to help create a climate in which your businesses can thrive in this state. Your message needs more leaders to articulate the obstacles you face. We can’t put these policies in place without you at the table.”

Emphasizing the power of press coverage for moving bills forward, Pacheco recommended dealers invite their legislators to see the reality of running their businesses.

“Have [your legislator] come through and say, ‘That sign by the road, the manufacturer didn’t give that to you, it’s a cost of doing business.’ Show them all the things that have a tremendous economic impact. Let the press see it,” he said.

Most importantly, Pacheco said, stay optimistic.“There’s nothing better for sales than a positive attitude about our future, a positive attitude about

our state.”Photos by shawn musgrave

19MSADA


MSADA Annual Meeting 2013

RMV continues online pushRachel Kaprielian has been the Registrar of

the Massachusetts Registry of Motor Vehicles since 2008, which means she has reached a cer-tain milestone: a whole license cycle.

“My signature is on every license in the state,” she said.

In her remarks, Kaprielian emphasized the move to online — for both RMV customers and dealers. “We were doing 1.8 million [RMV] transactions online, now we’re doing 3.2 mil-lion,” she said.

She said the RMV has made progress with the EVR program, and encouraged dealers to join in.“If you’re not on EVR, get with it, join us,” Kaprielian said. “It’s a good place to be.”

Kaprielian also addressed the recent audit of state inspections, not-ing she was mindful of the effect it was having on dealers.

“I know that many of you have been individually been speaking to my staff,” she said, “but I ask for your patience as we continue this internal review. We’re moving things along as quickly as possible.”

She concluded by saying her door is always open, and that her goal is to make life easier for dealers.

“It’s very simple,” she said, “What do you need for your custom-ers? What’s unnecessary?”

O’Brien outlines warranty parts reimbursement law

Frank O’Brien of O’Connor & Drew spoke on the new warranty reimbursement law in 93B, which established a formula to calculate the retail rate at which manufacturers must reimburse dealers for their parts.

“A lot of dealers have been reluctant to move for-ward, not wanting to rock the boat,” he said.

O’Brien attacked several common misconcep-tions, the first being that there is minimal bottom line impact. In fact, he said, dealers could be earn-ing hundreds of thousands of dollars by utilizing the law.

That being said, he added that there is no direct evidence of manufacturer retribution for participat-ing, and that the fear of manufacturers resisting ap-proval is overblown.

Finally, he noted that time is of the essence. “Wait-ing to participate is equivalent to throwing money away.”

MsAdA

MSADAMSADAAnnual Meeting20


Bradley delivers Internet sales pep talkSean Bradley, founder and CEO of consulting firm Dealer Synergy, shared pearls of wis-

dom from his more than 13 years of automotive internet sales and business development experience.

Dealers aren’t doing enough to meet their financial goals, Bradley warned. “If the economy is up why aren’t you up with it? There aren’t dealers that are absolutely

knocking it out of the park right now,” he said.He emphasized a focus on Internet marketing to buoy sales.“If you only have your toe in the water, as it relates to internet sales, then what do you

expect? You can’t eat the fish if you aren’t scuba diving where the fish are at,” Bradley said.

Gomez: For national-level help, elect a different kind of politician

A businessman and former Navy SEAL turned Senate candidate, Gabriel Gomez said the politi-cal status quo is creating roadblocks for auto dealers.

“Things may look good on paper. But they’re drawn up by career politicians and lawyers and not people who have worked in the private sector,” Gomez said.

Political newcomer Gomez was the GOP candidate in the June 25 special election to fill the Sen-ate seat vacated when John Kerry resigned to become U.S. Secretary of State.

Gomez recognized dealers as responsible for about 20 percent of Massachusetts’ economy, and said companies of all scopes and scales have the same concern: The burden of the cost of doing business. The solution, he says, is to elect representatives “who aren’t lawyers or career politicians.”

“I’ve had the honor to work with a lot of small companies, and I have a pretty unique perspective in terms of policies helping the economy,” Gomez said.

Elected officials who are more like him, Gomez said, would best serve dealers at the national policy level.

Economic recovery possible if Washington cooperates, Magliano says

George Magliano, a senior principal econ-omist at IHS Automotive, said economic re-covery is occurring, but it will continue to be slow. A weak dollar and messy fiscal policy are just two of the reasons we’re “living from day-to-day,” he said.

“The great recession has broken the back of retail inflation; it’s broken the back of oil pric-es,” said Magliano. “Housing, I can finally sit up here and say it has turned a corner. Every day the numbers get better.”

The economic climate has affected custom-ers -- it’s changed what they’re looking for in a car.

“Consumers are seeking less ostentation and more value,” Magliano said.

Magliano said if policy at the federal level settles down, the industry can continue the re-covery and continue to post higher sales.

“At the end of the day, we’ve grown sales from 10 million to around 15 million. Our forecast for this year stands at 15.3 million. If we can get rid of the fiscal fiasco, we have big-ger potential,” he said.

MSADAMSADA 21


Automotive News reporter talks GMAward-winning, Detroit-based Automotive News reporter Mike Colias shared in-

sights from his time spent covering General Motors. Colias said that as a journalist, he has the access to executives needed to know the

inside story -- and the freedom to call it as he sees it. “Our job is to come back and filter that and provide context for the reader,” Colias

said.The number one question he gets is whether he sees GM slipping back into its pre-

bankruptcy ways.“I think that’s the risk,” he said. “If those who are still there forget how they got

into the mess, beating up dealers. If they start doing that stuff, it’s an indication of a backslide.”

But the line-up, he said, is strong. “I don’t remember the last time I talked to a dealer who was unhappy with the

product the company was shipping them,” he said.

MsAdA


from Around the HornNEWS

FRAMINGHAM

Connolly Chevrolet Holds Gomez Fundraising Event

Republican Senatorial candidate Gabriel Gomez recently appeared at a fundraising event hosted by MSADA Vice President Chris Connolly and his brother, Adam, at Connolly Chevrolet. Pictured, from left, Jerry Chase, Framingham Ford; Gabriel Gomez; Chris Connolly; and MSADA Execu-tive Vice President, Robert O’Koniewski.

MENDON

Local Car dealers adding staff to Keep up With sales

With auto sales on the rise, car dealerships in the area are opening their doors to new employees in nearly every department.

Michael Penner, general manager at Imperial Cars in Mendon, told The Worcester Telegram & Gazette the dealership is doubling its sales team and adding jobs all over the company.

May car sales were up 8.1 percent from 2012, totaling about 1.4 million vehicles sold nationwide, according to Edmunds.com, a car-shopping web-site that also tracks trends in the industry.

Penner estimated that company-wide, he has hired an additional 50 people so far this year, and plans to add another 50 people to the “family” of about 300 at the site.

Imad Benelkour, the sales manager at Herb Chambers Toyota in Auburn, said every month so far this year has beat last year’s numbers. He reported that he filled five positions so far this year. With a sales team of 21, he plans to add another three or four people.

NADA reported that new-vehicle dealership sales totaled $15.5 billion in 2012, an average of $38.4 million per dealership.

On average, Massachusetts dealerships that sell new cars employ 49 peo-ple, who earn about $62,000 per year, the association reported.

22

STONEHAM

In Memoriam

alan MelkonianLongtime MSADA member Alan K. Mel-

konian of Stoneham died in his home on Fri-day, June 7. He was 58.

For 36 years, Melkonian led Stoneham Ford, a premier new and used Ford dealer located on Route 28. He served on the Board of Directors at StonehamBank for 18 years.

Melkonian graduated from Middlesex Community College with an associate in

arts degree in Retail Man-agement in 1975. Previ-ous “Citizen of the Year,” M e l k o n i a n was often recognized as a contributor to his com-munity. He donated time and funds to organizations ranging from

Stone Zoo to Stoneham Theater. He is survived by his wife, Joyce Melko-

nian; his daughters, Jenna Melkonian and Laura Dierksmeier, and son-in-law Claus Dierksmeier; his father, John Melkonian and his wife Gail; his brothers, Ralph Melkonian and his wife Kathleen, Ron Melkonian and his wife Carleen, and Mark Melkonian and his wife Claire; as well as many nieces and nephews. Melkonian was predeceased by his mother, the late Alice Melkonian.

A memorial service was held June 10 in the Barile Family Funeral Home. A funeral service was held on Tuesday, June 11 in St. Patrick Church. Donations in Melkonian’s memory can be made to Compassionate Care.


23MSADA

Balise Ford has opened a new dealer-ship in Wilbraham on Boston Road.

A ribbon cutting ceremony was held May 23 at the 27,000 square-foot deal-ership. The additional showroom and service space means that the company expects to add about 20 jobs from the previous dealership, which was located on the same property. That brings their total workforce up to 60 people.

“This was a long time coming,” Balise Auto Group President Jeb Balise told WWLP. “Just because of the credit crunch and everything that happened with the auto industry, this store got de-layed.”

The dealership remained open during the ongoing construction; it operated out of the former Medeiros-Williams Chev-rolet dealership about a half a mile down Boston Road.

WILBRAHAM

Balise Ford opens New Wilbraham dealership

from Around the Horn24 NEWS


NORTH ADAMS

Toyota Honors K-M Motors for 50-Year Partnership

Toyota Regional General Manager Cooper Erickson awarded K-M Motors with a glass trophy 50-year award recently during a brief ceremony at K-M Motors’ Curran Highway showroom.

Owner Dennis Dubie said K-M Motors is the only new-car re-tailer in North Adams — the waves of re-cessions have left them the last standing. He said that des igna t ion is special, but feels empa-thetic toward owners who discontinued service because of the difficult economic climate.

Henry Kolac first opened K-M Motors, formerly known as Nash North Adams, in 1945. The store was later renamed to K-M Motors after taking a different franchise.

Dubie joined K-M Motors in 1980, partnering with Henry Kolac. After Kolac’s death in 1991, Dubie took sole ownership. His son Derek Dubie is the general man-ager of the shop.

BOSTON

Infiniti Honors Massachusetts dealerships

Infiniti of Norwood and Kelly Infiniti have been rec-ognized with the 2013 Award of Excellence.

“The Infiniti Award of Excellence is a recognition pro-gram designed to honor those who contribute to building the Infiniti brand by consistently delivering a unique and personalized experience for their customers,” the com-pany said in a statement. “This experience is measured in part by the Total Ownership Survey – a survey that your sales and service customers receive.

“The Award of Excellence not only recognizes and re-wards dealerships that excel in sales and satisfaction; it also reinforces the standards of excellence set for all by describing the key actions that will produce a powerful awareness of the Infiniti brand.”

Derek Dubie, left, Dennis Dubie, Cooper erickson and nancy Kolac pose with the trophy for the 50-year partnership between Toyota and K-M Motors.

25MSADA


A June graduate from Waltham High School won a certified pre-owned car as part of this year’s Keys to Success program.

Maria Millan is the sixth winner of Keys to Success, an incentive program that rewards high school students who achieve excellence. Monthly, students are given prizes for ex-celling in various categories during the school year. At the end of the year, those recognized have the opportunity to compete to win the car.

Honda Village in Newton kicked off the 2012-13 program to motivate and recognize Waltham students to excel in vari-ous areas including attendance, community service, improve-ment in grades and other categories. Honda Village supplies the certified pre-owned car that the students compete to win.

To coordinate this effort and manage the program through-out the year, the dealership works with the faculty at Waltham High School.

Millan volunteered as a translator for several school events. She assisted and translated for families and parents who do not speak English during the open houses and other school assem-blies. She just got a job with the Waltham Rec Department.

WALTHAM

‘Key to success’: Waltham Graduate Wins Car

26


from Around the HornNEWS

RAYNHAM

New England Motor Press association Lauds styling of 2014 Mazda6

Typically, the design lines of a concept vehicle are toned down significantly before they ever see the light of the showroom on a production model. That was not the case for the bold Mazda TAKERI concept, which was modified only slightly before it arrived at dealers as the 2014 Mazda6. The New England Mo-tor Press Association recently applauded that potentially risky move by Mazda, honoring the automaker’s new midsize sedan with its 2013 Gene Ritvo Award for Design and Elegance.

Named after the prolific automotive photographer who passed away in 2009, the Gene Ritvo Award for Design and Elegance is presented annually to the concept or production ve-hicle that offers the best of design in the auto industry, whether it is through an overall design, a marketing campaign or a spe-cific style element. The 2014 Mazda6 incorporates Mazda’s new KODO, or Soul of Motion, design language, donning swept-back headlights, an aggressive hexagonal grille and

flared fenders that flow back into contoured design lines.“Midsize sedans are usually designed to appeal to the lowest

common denominator of buyers’ tastes, but the new Mazda6 instead appeals directly to their hearts,” said Barry Chew, sales manager of Mastria Mazda. “The Mazda6’s responsive driving dynamics reflect that sense of excitement as well, but the car remains highly practical by offering great fuel economy for the daily commute.”

t

MSADA 27nAdA Update

It was great to see many of my fellow dealers at the MSADA Annual Meeting in Boston. Certainly, it was a well planned event that gave all of us valuable information. Kudos to Bob O’Koniewski, Scott Dube and the staff of MSADA for bringing us all a first class event.

As I mentioned in my remarks, the franchise system is under attack. I know that NADA and MSADA have the re-sources and the will to defend what we know is the most efficient and consumer-friendly distribution and sales sys-tem for vehicles in the world. It is important that we all “talk up” the franchise system and understand and be able to discuss the benefits that this distribution system brings to our customers.

New NADA President Testifies before Senate on Rental Car Recall Bill

NADA President Peter Welch testified May 21 before a Senate consumer protection subcommittee on Senate 921, a bill concerning rental car recalls. During his testimony, Welch emphasized the vital role that auto dealers play in fixing re-called vehicles. While supporting the purpose behind the bill, Welch informed Senators that recall work can sometimes be delayed because the part needed to remedy the recalled ve-hicle has not yet been designed or manufactured. Under the bill, a rental vehicle would have to be put out of service if the part needed was unavailable. NADA’s president cautioned Senators against regulating “multinational corporations with fleets of hundreds of thousands of rental vehicles” the same as “auto dealers with fleets of five loaner vehicles.” Welch also raised concerns that the bill would subject dealers to new federal inspections, new federal reporting requirements and stiff new penalties.

Letter to CFPB Demands Release of Information Supporting its Fair Lending

AllegationsA letter circulated by Rep. Terri Sewell (D-Ala.) and signed

by 12 of her Democratic colleagues on the House Financial Services Committee was sent to CFPB director Richard Cor-

dray on May 28. The letter asks for the analysis and method-ology supporting the CFPB’s assertion in recent fair lending guidance issued to finance sources that there may be disparate impact discrimination in indirect auto lending. The CFPB is using this allegation to push finance sources to compensate dealers with flat fees instead of dealer reserve. Despite nu-merous requests, the CFPB has steadfastly refused to release this information or any data supporting its efforts to elimi-nate the dealer’s ability to discount the interest rate offered to consumers. This lack of transparency, coupled with the mem-bers’ concern that “credit markets function competitively and efficiently,” prompted this inquiry. The other signers of the letter were Reps. Joyce Beatty (Ohio), William Lacy Clay (Missouri), John Delaney (Maryland), Bill Foster (Illinois), Denny Heck (Washington), Dan Kildee (Michigan), Gregory Meeks (New York), Patrick Murphy (Florida), Ed Perlmutter (Colorado), Gary Peters (Michigan), David Scott (Georgia) and Kyrsten Sinema (Arizona)

Guidance/Model Forms Issued for Required Health Care Reform Law Notices

The U.S. Department of Labor (DOL) on May 8 provided “temporary guidance” regarding the written notice employ-ers are required to provide to their employees under the Pa-tient Protection and Affordable Care Act (PPACA). PPACA requires that applicable employers must provide each em-ployee with a written notice providing the employee with information about the state and federally-facilitated health insurance exchanges and how to request assistance, describ-ing the availability of a premium tax credit (if applicable) and outlining the implications for the employee if they choose to purchase a qualified health plan through an exchange. The notice requirement was originally scheduled to take effect on March 1, 2013, but subsequent guidance has indicated that the timing for distribution of notices will be the late summer or fall of 2013 in coordination with the open enrollment pe-riod for exchanges.

Along with technical release, the following model notices have also been issued by the DOL:

•Model notice for employers who offer a health plan to some or all employees;•Model notice for employers who do not offer a health plan;•COBRA model election notice; and•COBRA model election notice redline version Dealers should consult their health care consultant, insur-

ance carrier or other outside professional to determine which form is appropriate for your dealership, and how to properly complete and distribute that form to your employees.

t

by Don Sudbay

A Franchise System Under Attack

don sudbay, president of sudbay automotive Group, represents msada members on tHe nada board of directors. He welcomes your questions and concerns ([email protected]).


28


The U.S. automobile industry sold 1.4 million light vehicles in May 2013 – this marked an increase of 12.3 percent from April 2013 and an increase of 8.0 percent over last May. May 2013 YTD figures bring total light vehicle sales to 6.4 million up 7.1 percent from a year ago. The May 2013 SeasonallyAdjusted Annual Rate (SAAR) for light vehicle sales is 15.2 million units up from the SAAR value of April 2013 which was 14.9 million units.

In May 2013 YTD figures, car sales held a market share of 50.1 percent and were up 3.4 percent from a year ago while corresponding figures for light trucks put the light truck share at 49.9 percent with sales up 11.1 percent from a year ago. See Figure 1.

BrandsThe Detroit 3 brands held the largest market share of light ve-

hicle sales in May 2013: 45.9 percent of the market. This was fol-lowed by brands based in Asia/Pacific at 45.4 percent and then brands based in Europe at 8.7 percent. The OEM/brand categories, by geographic base – Detroit 3, Asia/Pacific and Europe – all ex-perienced growth in light vehicle sales in May 2013 YTD figures from last May.

In May 2013 YTD figures, the Detroit 3 also held the largest share of U.S. light vehicle sales at 46.0 percent.

This was an increase from 44.8 percent a year ago. The corre-sponding share held by all the Asia/Pacific-based brands was 45.1 percent and that for all the Europe-based brands was 8.9 percent of U.S. sales YTD. Of the Detroit 3, Ford has experienced the most

growth in YTD sales, from a year ago, at 12.5 percent, followed by Chrysler (9.3 percent) and then General Motors (8.3 percent).

An assessment of the performance of major brands in the U.S. market – Ford (not including Lincoln), Chevrolet, Toyota, Honda, Nissan and Dodge – revealed the dominance of the Ford brand lead-ing this group with a May 2013 YTD market share of 15.7 percent followed by Toyota with 14.3 percent and Chevrolet in third place with a share of 12.9 percent.

Focus: The major brands with a geographic base in Asia/Pacific – Toyota, Honda, Nissan, Hyundai and Kia Motors. With the ex-ception of Kia Motors, all brands experienced an increase in May

2013 YTD sales over last year. In this group, Nissan had the largest growth figure of 7.2 percent in YTD sales and it is the only brand that has held its market share of 8.1 percent of total U.S. sales YTD from a year ago. The other brands – Toyota, Honda,

Hyundai and Kia Motors – all experienced declines in their YTD market share from a year ago. See Figures 2, 3 and 4.

SegmentsOf all the segments, the cross utility vehicle (CUV) segment con-

tinues to hold the largest share in sales YTD figures; for May 2013 YTD figures, the CUV share was 24.8 percent. In terms of YTD segment market share, this is followed by middle cars (21.3 per-cent) and small cars (19.7 percent), respectively.

It must be noted that the CUV segment share has grown from last

review of Second Quarter light New vehicle Sales

nAdA Market BeatProduced by NADA’s Industry Analysis Group • Angela lisulo, economist

FIGURE 1


29

Produced by NADA’s Industry Analysis Group • Angela lisulo, economist

year while those of middle cars and small cars have contracted. For May 2012 YTD values, the CUV share was 22.8 percent while those of middle cars and small cars were 22.5 percent and 20.1 percent, respectively.

The greatest growth in May 2013 YTD sales, from a year ago, was in the CUV segment (16.4 percent) followed by pick-ups (14.1 percent). Within the CUV segment, for May 2013 YTD, all sub-segments experienced growth from a year ago and the middle CUV had the largest number of sales with 1,004,952 units. Within the pickup segment, for May 2013 YTD, the large pickup had the largest number of sales with 747,577 units and it is the only sub-segment that has expe-rienced growth from a year ago (the only other subsegment (the small pickup) has experienced a decline in sales since last May). See Figures 5 and 6.

FIGURE 2 FIGURE 3

FIGURE 4

FIGURE 5

Power sourceNote: All data provided by WardsAuto unless otherwise stated.

WardsAuto does not include vehicle sales delivery information for Tesla Motors.

Although gasoline exhibits clear dominance in U.S. light vehicle sales by power source, its share continues to be in slight decline – gasoline held a market share of 93.6 percent of May 2013 YTD light vehicle sales while its share was 94.0 percent a year ago. The diesel category held its YTD market share from a year ago: 2.7 percent of U.S. light vehicle sales. Electric vehicles, hybrids and plug-in hybrids have each experienced growth in sales from a year ago, in YTD figures.

In May 2013, for the alternative power category, the U.S. auto-mobile industry sold 2,537 electric vehicles, 48,247 hybrid vehicles, 3,209 plug-in hybrid vehicles and no fuel cell vehicles amounting to 53,993 light vehicle sales.

Focus: Electric vehicles. In the alternative power category, May

2013 YTD figures put electric vehicles with the greatest growth in sales at 175.4 percent from a year ago. Within the electric vehicle cat-egory, for May 2013 YTD, the Nissan Leaf is the vehicle with largest number of sales with a value of 7,614 units – nearly 4⁄5 of reported electric vehicle sales. However, it must be noted that there is addi-tional information pertaining to electric vehicle sales in the U.S. – ac-cording to LMC Automotive, 6,322 units of the Tesla Model S electric vehicle by Tesla Motors were sold in April 2013 YTD. See Figure 7.

ModelsFrom the list of top selling vehicles for the month, the leading 2

vehicles were pickup trucks: Ford F Series and the Chevrolet Sil-verado. Third, fourth and fifth place were occupied by cars: Toyota Camry, Honda Accord and Nissan Altima, respectively. This marked a difference from April 2013 sales numbers when the 5 leading vehicles for the month consisted of 3 pickup trucks and 2 cars. See Figure 8.

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FIGURE 6

FIGURE 7 FIGURE 8

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Massachusetts Auto Dealer Magazine - June 2013

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Transcript of Massachusetts Auto Dealer Magazine - June 2013